G.B. Lawns Private Limited Vs DCIT (ITAT Delhi)

The Income Tax Appellate Tribunal (ITAT) disposed of two appeals filed by the assessee for Assessment Years 2017-18 and 2018-19 arising from assessment d penalty proceedings under the Income-tax Act.

For AY 2017-18, the assessee, engaged in operating a shopping mall under the name Shalimar ELDEE Plaza, had filed its return declaring rental income as business income. During scrutiny assessment under Section 143(3), the Assessing Officer (AO) made several additions and disallowances, including an addition of ₹70,94,297 towards alleged short receipt of rent, additions of ₹51,97,500 and ₹34,35,700 in respect of advances received from purchasers, an addition of ₹1,06,90,000 under Section 68 relating to an unsecured loan, disallowance of bad debts, repair and maintenance expenses, and certain other business expenses. The Commissioner of Income Tax (Appeals) upheld these additions, following which the assessee appealed before the Tribunal. The assessee did not press the ground challenging the validity of the notice under Section 143(2), and that ground was dismissed.

Regarding the addition of ₹70,94,297 towards alleged notional rental income, the AO had relied upon a Memorandum of Understanding (MOU) dated 03.02.2011 for computing higher rent. The assessee submitted that the earlier MOU had never been acted upon and had been replaced by another MOU dated 24.06.2011. Before the Tribunal, the assessee relied upon the later MOU, a confirmation from the tenant M/s Future Retail Limited (Big Bazaar), monthly rent advices, invoices, bank entries and Form 26AS to demonstrate that rent had been received strictly in accordance with the operative MOU dated 24.06.2011. The Revenue contended that the later MOU was an afterthought because the earlier agreement had originally been furnished before the AO. The Tribunal observed that the tenant, being an independent party, had categorically confirmed payment of rent under the later MOU and that the documentary evidence, including bank entries and Form 26AS, supported the assessee’s claim. It also noted that no dispute had been raised by the Revenue regarding rental income in earlier years based on the later MOU. The Tribunal held that the assessee had correctly declared the rental income and deleted the addition of ₹70,94,297.

The Tribunal next considered additions relating to advances received from purchasers. In respect of ₹51,97,500 received from M/s VJS Properties Pvt. Ltd., the assessee submitted that the amount represented advance received during FY 2011-12 against sale of shop space and had continued as an advance because no sale deed had been registered. The Tribunal observed that the confirmation from the purchaser supported the assessee’s explanation and that the amount had been received as booking advance. It held that no addition under Section 41(1) was warranted and directed deletion of the addition.

With respect to ₹34,35,700 received from Shri Nitin Bansal and Smt. Anita Gupta, the assessee produced affidavits, an indemnity bond, endorsement memo and declaration showing that the original allottees had transferred their booking rights to M/s Mentor Infratech Pvt. Ltd. The Tribunal observed that merely because the advances continued to be reflected in the names of the original allottees, the liability could not be treated as ceased or bogus. It held that only accounting entries transferring the balances remained to be passed and directed deletion of the addition.

The Tribunal then examined the addition of ₹1,06,90,000 under Section 68 relating to an unsecured loan from Shri Ajit Kumar. The AO had made the addition because notices issued under Section 131 were not complied with, while the CIT(A) held that genuineness and creditworthiness had not been established. The assessee submitted that the amount represented an opening balance brought forward from earlier years and produced the ledger account in support. The Tribunal observed that Section 68 applies only to sums credited during the relevant previous year and that the disputed amount was an opening balance. Relying upon the Delhi High Court decision in CIT Vs Usha Stud Agricultural Farms Ltd., it held that no addition could be made under Section 68 in respect of opening balances and deleted the addition.

The Tribunal also considered disallowances relating to bad debts and business expenditure. Regarding the amount written off in the name of Yellow Chillies, the Tribunal noted that the assessee had written off the debt in its books and, relying upon the Supreme Court decision in TRF Ltd. vs. CIT, held that the deduction was allowable. It therefore directed deletion of the disallowance.

As regards repair and maintenance expenses of ₹7,00,609, the Tribunal observed that the assessee had furnished the relevant evidence before the AO and that no specific defect had been pointed out. It therefore deleted the disallowance.

With respect to the disallowance of ₹1,25,108 comprising pooja expenses, interest on service tax, interest on TDS and stamp-related expenses, the Tribunal observed that pooja expenses constituted customary business expenditure and that interest on service tax represented normal business expenditure. However, it confirmed the disallowance relating to interest on TDS while deleting the remaining disallowances. Consequently, the appeal for AY 2017-18 was partly allowed.

For AY 2018-19, the dispute related to penalty levied under Section 271AAC. An assessment under Sections 147 read with 144B had resulted in an addition of ₹50 lakh under Section 68 and application of Section 115BBE. The assessee had challenged the assessment before the Allahabad High Court by filing a writ petition alleging non-issuance of notice under Section 143(2) and denial of opportunity of hearing. The writ petition had been admitted and remained pending. Meanwhile, the AO levied penalty under Section 271AAC, which was confirmed by the CIT(A).

The Tribunal observed that the writ petition challenging the very assumption of jurisdiction was pending before the Allahabad High Court and that the matter had not attained finality. Considering that the issue remained sub judice, the Tribunal held that penalty under Section 271AAC could not be sustained at that stage. It deleted the penalty while directing that, if the assessee failed in the pending writ petition, the AO would be at liberty to reinitiate penalty proceedings in accordance with law. The appeal for AY 2018-19 was accordingly allowed. Both appeals filed by the assessee were ultimately allowed in the manner stated by the Tribunal.

FULL TEXT OF THE ORDER OF ITAT DELHI

These two separate appeals are filed by the assessee against the two separate orders passed by the Learned Commissioner of Income Tax (Appeals)-24 dated 25.09.2025 and 24.09.2025 in Appeal Nos. CIT(A), Lucknow-1/10846/2019-20 and Appeal No. CIT(A), Delhi-24/10386/2017-18 arising out of order passed u/s 143(3) dated 28.12.2019 and 271AAC(1) of the Act dated 29.09.2023 for Assessment Year 2017-18 and 2018-19 respectively.

2. As both the appeals are related to one assessee, therefore, they are disposed off by a common order.

3. First we taken up the appeal of the assessee in ITA No.7639/Del/2025 for Assessment Year 2017-18.

ITA No.7639/Del/2025

4. Brief facts of the case are that assessee has filed its return of income on 30.10.2017 declaring total income at Rs. 85,98,810/-. The assessee engaged in the business of running of a shopping Mall under the name of M/s Shalimar ELDEE Plaza, Indira Nagar, Lucknow. The assessee company has declared the rental income as business and profession. The case of the assessee was selected for scrutiny and notice u/s 143(2) was issued on 18.09.2018 period by the notices issued u/s 142(1) along with questionnaire from time to time. The AO observed that as per the Form 26AS assessee has received Rs.1,57,53,703/- as a rental income from M/s Future Retail Limited (Big Bazaar). However, the AO based on the copy of the rent agreement dated 18.12.2019 has recomputed the total rental income at Rs.2,28,48,000/- and the differential of amount of Rs.70,94,297/- was added as income of the assessee. The AO further observed that assessee has shown booking advance of Rs. 1,21,09,580/- including advance from M/s VJS Properties Pvt. Ltd. of Rs.51,97,500/- and when the AO has made enquiry from the said company, it was replied that M/s VJS Properties Pvt. Ltd. has purchased office space in the year 2011­12 for Rs.51,97,500/-. Therefore, the AO treated the advance shown in the name of M/s. VJS Properties Pvt. Ltd. of Rs.51,97,500/- as tax liability and made the addition of the same. The AO further observed that assessee has shown advance of Rs. 34,35,700/- in the name of the Sh. Nitin Bansal and Smt. Anita Gupta and when the enquiries were made from them, it was replied by them that the said sum was given in Financial year 2012-13 for purchase of office at Shalimar Eldee Plaza which was refunded in subsequent financial year and submitted the copy of the confirmation of cancellation. Thus, the AO treated the liability of Rs.34,35,700/- appearing in the books of account as unexplained and made the addition for the same. Besides this, the assessee shown loan of Rs.1,06,90,000/- in the books, however, the lender has not made any compliance against the summon issued u/s 131 nor the assessee had filed the details to prove the genuineness and creditworthiness of lender, and therefore, the said amount was added to the income of the assessee. The assessee has written off the balance of Rs.10,55,888/- outstanding in the name of Yellow Chillies (Restaurant), however, no relevant evidences or documents were furnished, therefore, the same was disallowed. Likewise, out of maintenance expenses a sum of Rs.7,00,609/- was disallowed. Besides disallowance out of various expenses holding the same as personal in nature of Rs.1,25,108/- was also made. Accordingly, the total income of the assessee was assessed at Rs.3,59,47,612/-.

5. Aggrieved by the said order, the assessee filed an appeal before the Ld. CIT(A), who vide order dated 25.09.2025 has dismissed the appeal of the assessee.

6. Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking following grounds of appeal:

1. BECAUSE the Ld. CIT(A) has erred in law and on facts in upholding the validity of notice issued u/s 143(2), without appreciating that the notice dated 18.09.2018 was issued mechanically on the basis of CASS without the mandatory “application of mind” as required under section 143(2)(ii); hence, the assessment framed under section 143(3) of the Act is void ab initio.

2. BECAUSE the Ld. CIT(A) gravely erred in rejecting the appellant’s Rule 46A application despite the fact that the Assessee had established sufficient cause under Rule 46A(1)(b) & (d) namely:

(a) the correct MOU dated 24.06.2011could not be brought on records of AO due to inadvertent oversight explained in detail in the Rule 46A petition;

(b) supporting confirmations, emails, rent advice, monthly bills, and payment proof from Future Retail Ltd. could not be produced before AO because the AO never required or confronted any discrepancy and never issued a show-cause notice; (c) the additional evidence was crucial, authentic, and directly relevant for adjudicating Grounds raised.

2.1 BECAUSE the Ld. CIT(A) further erred in dismissing the Rule 46A application on legally untenable grounds despite acknowledging that the AO never issued a proper opportunity or confronted the Assessee with the basis of the proposed addition thus violating section 142(3).

3. BECAUSE the Ld. CIT(A) erred in sustaining the addition of Rs. 70,94,297 towards alleged “notional rent” by relying on a cancelled MOU dated 03.02.2011, ignoring:

(i) the correct operative MOU dated 24.06.2011, duly explained in submissions and produced as additional evidence;

(ii) the confirmation dated 08.02.2022 from Future Retail Ltd. confirming that rent was paid strictly in terms of the MOU dated 24.06.2011;

(iii) complete documentary trail monthly emails, rent advices, TDS entries, bank credits demonstrating actual rent of Rs. 1,57,53,703. The addition is purely hypothetical and contrary to evidence.

3.1 BECAUSE the CIT(A) failed to appreciate that no opportunity whatsoever was given by the AO before making the addition for alleged under-reported rent, which is in complete violation of section 142(3) and principles of natural justice; the Ld. CIT(A) failed to cure this fatal defect.

4. BECAUSE the Ld. CIT(A) erred in sustaining addition of Rs. 51,97,500 relating to VJS Properties Pvt. Ltd., despite incontrovertible evidence that the amount was an opening balance from FY 2011-12, and therefore could not be taxed in AY 2017-18, reliance on third-party reply without confronting the Assessee violates section 142(3) of the Act.

4.1 BECAUSE the CIT(A) erred in ignoring that the AO relied on third-party information collected behind the back of the Assessee and never confronted or allowed cross-examination; the addition violates binding principles of law.

5. BECAUSE the Ld. CIT(A) erred in sustaining the addition of Rs. 34,35,700 relating to Anita Gupta and Nitin Bansal, without appreciating that:

(i) the amount was received in FY 2012-13 & 2013-14, duly supported by bank proofs;

(ii) the amount was never refunded, contrary to third-party statements;

(iii) the AO never confronted the adverse material nor complied with section 142(3) of the Act.

5.1 BECAUSE the CIT(A) failed to appreciate that the amounts relating to booking advances (VJS Properties & Anita Gupta/Nitin Bansal) were capital receipts and opening balances, and therefore section 68/69C has no application whatsoever.

5.2 BECAUSE the CIT(A) erred in sustaining the addition by wrongly invoking cessation u/s 41(1) when no deduction had ever been claimed in earlier years and liability represented capital receipt.

6 BECAUSE the Ld. CIT(A) erred in sustaining the addition of Rs. 1,06,90,000 treating opening unsecured loan from Shri Ajit Kumar as unexplained merely because the creditor did not appear; the appellant had discharged its burden by furnishing:

• • • identity details,
    • complete ledger extract showing opening balance, and
    • books of account. Once the amount is an opening balance, no addition can be made in the year under appeal.

6.1 BECAUSE the AO’s action in relying on alleged non-compliance by the creditor without confronting the assessee violates section 142(3) and renders the addition unsustainable; the CIT(A) erred in not deleting the addition.

7 BECAUSE the CIT(A) erred in sustaining disallowance of Rs. 1,05,588 (Yellow Chillies) ignoring that the debt was duly written off as irrecoverable, fulfilling the conditions of section 36(1)(vii); no show-cause notice was ever issued.

8 BECAUSE the CIT(A) erred in sustaining disallowance of Rs. 7,00,609 under repairs and maintenance merely on alleged absence of vouchers, overlooking:

• • • payments through banking channels,
    • nature of expenditure, and
    • absence of any specific defect or show-cause notice.

9. BECAUSE the CIT(A) erred in sustaining disallowance of Rs. 1,25,108 treating legitimate business expenses (pooja expenses, TDS/service tax interest, stamp charges) as “personal or penal”, ignoring:

• • • interest on service tax/TDS is compensatory,
    • stamp-duty write-off is revenue expenditure,
    • pooja expenses are customary business expenditure in a commercial complex.

10. BECAUSE the Ld. CIT(A) passed the order mechanically without independent adjudication and without considering the detailed written submissions, voluminous evidences, and case law placed on record.

11. BECAUSE the additions upheld by the CIT(A) are contrary to facts, law, evidence, and principles of natural justice, and deserve to be deleted in full.

12. BECAUSE the appellant craves leave to modify, add or withdraw any ground at the time of hearing.

7. Before us, the Ld. AR for the assessee has not pressed the ground of appeal No.1, thus, the same is dismissed.

8. Grounds of appeal No.2 to 3 are with respect to the addition of Rs. 70,94,297/- made on account of notional rental income.

9. The AO based on the MOU (rent agreement) dated 02.02.2011 has worked out the amount of rent payable during the year at Rs. 19.04 lacs per month. The Ld. AR submits that the said MOU dated 03.02.2011 was inadvertently furnished by the assessee before the Ld. AO and the said MOU though was prepared was never acted upon and another MOU (rent agreement) was executed between the parties on 24.06.2011 which was submitted before the ld. CIT(A). The ld. CIT(A) has not accepted the said MOU by holding the same as an afterthought. Copy of the said MOU is placed in the PB pages 4 to 22 along with petition filed under Rule 46A of the Income Tax Rules, 1962 (the Rules) before the Ld. CIT(A). Besides this, Ld. AR drew our attention to the confirmation given by the tenant M/s Future Retail Limited (Big Bazaar) wherein it had confirmed that the tenant had made the payment of rent during the Financial year 2016-17 as per MOU dated 26.04.2011. The Ld. AR further submits that copies of the monthly payment advices received with respect to the rent received from M/s Future Retail Limited (Big Bazaar). The relevant copies of these documents are placed at PB 4 to 48 of the paper book filed before us. The Ld. AR submits that the assessee has received rent as per the MOU dated 24.06.2011 which is duly supported by the entries appearing in Form 26AS and corresponding entries in the bank accounts of the assessee. The AO made the addition by relied upon the MOU dated 03.02.2011 which was never acted upon and also confirmed by both the parties and, therefore, requested for deletion of the same.

10. On the other hand, ld. Sr. DR vehemently supported the order of the lower authorities and submits that the assessee itself has filed the copy of rent agreement dated 02.02.2011 before the AO and, therefore, taking plea that the said agreement was never acted and filed another agreement is purely an afterthought, and therefore, requested for the confirmation of the addition so made.

11. Heard the parties and perused the materials available on record. It is observed that AO has computed the monthly rent at Rs.19.04 lacs on the basis of the MOU dated 03.02.2011. It is further observed that the assessee has later filed another MOU (rent agreement) dated 24.06.2011 executed between the appellate company and M/s Future Retail Limited (Big Bazaar) available at Page 4 to 22 of the PB. The claim of the assessee is that the rent was paid by the tenant M/s Future Retail Limited (Big Bazaar) which is an independent party. The other MOU dated 03.02.2011 was never acted upon and was later modified vide MOU dated 24.06.2011. Another important fact which was ignored by both the lower authorities is that the claim of the assessee was further confirmed by the tenant M/s Future Retail Limited (Big Bazaar) who vide its confirmation letter filed on 08.02.2022, placed at PB-23 for ready reference, has reaffirmed this fact. The same is reproduced herein below:

12. It could be evident from the above confirmation filed by the tenant who is as an independent party and has taken the commercial space on rent in the shopping mall constructed by the assessee. The tenant has categorically admitted that rent was paid as per the MOU dated 24.06.2011 and necessary evidences in the shape of advices were also filed. It is further observed that the assessee company has filed the necessary copes of the invoices raised and the bank entries confirming the fact that the rent was received in accordance with MOU dated 24.05.2011. The year under appeal is Ay 2017-18 and the agreement is executed in 2011, therefore during the period from 2011 to 2016, no doubts were raised by the Revenue on the rental income declared by the assessee based on the MOU dated 24.06.2011. Under these circumstances, we are of the view that the assessee has duly declared the rental income as per the modified MOU dated 24.06.2011. Accordingly, we hereby delete the addition of Rs. 70,94,297/- made on account of notional rent by the AO disbelieving the confirmation filed by the tenant, rent agreement, bank entries and 26AS statement matching with the said confirmation. Accordingly, the grounds of appeal No. 2 & 3 are allowed.

13. Ground No. 4 to 4.1 are with respect to the confirmation of addition of Rs. 51,97,500/- made out of the advance received shown in the name of M/s VJS Properties Pvt. Ltd. as bogus liability. Ground No. 5 to 5.4 are with respect to addition of Rs. 34,35,700/- being part of the advance received from Sh. Nitin Bansal and Anita Gupta alleged the bogus liability. Since, both the grounds of appeal are related to the addition made by the AO out of the advance booking received and held as cessation of liability u/s 41(1) of the Act, therefore, they are taken together for consideration.

14. Before us, the Ld. AR submits that though these amounts were received as advance against the sale of shopping mall/office space to the respective parties, however, since no sale deed was got registered, therefore, the amounts were shown as advances in the Balance Sheet. The Ld. AR submits that the respective parties in their confirmation has also verified this facts that they have purchased shop/office space, and rather accepted that the funds were given to the assessee company against the proposed transactions of purchases of office space/ shop. The Ld. AR further submits that in the case of advance received from Amita Gupta and Nitin Bansal, they transferred their booking rights to M/s Mentor Infratech Pvt. Ltd. and copies of the necessary affidavits and the endorsement letter were filed before the lower authorities which are available at pages 239 to 242 of PB. Ld. AR submits that the once that booking were transferred by the respective parties, merely continued the said advance booking amount in the name of the old buyers in the books by the assessee does not made the said booking advances as cessation of liability and therefore, he prayed that the additions so made may please be deleted.

15. On the other hand, the Ld. Sr. DR vehemently supported the orders of the lower authorities and submits that AO has made direct enquiries from respective parties and wherein they had accepted that the transactions of purchases of property were either stood completed or cancelled and, therefore, the AO has rightly treated the amounts still showing in their names as advances as cession of liability u/s 41(1) and she prayed for the confirmation of the addition so made.

16. Heard the parties and perused the material available on record. With respect to the advance of Rs.51,97,500/- received from VJS Properties Pvt. Ltd., it is an admitted fact that the said sum was received by the assessee in FY 2011-12 against the sale of shops and was carried over from the preceding years. It is also a fact the shop has been constructed and transaction of sale is completed when the physical possession is handed over to the buyer M/s VJS Properties Pvt. Ltd. and sale deed is got registered. Since the sale deed was not got registered therefore the advance booking received remained as part of the advance. It is further observed that in the confirmation filed by M/s VJS Properties Pvt. Ltd., it was never stated that the amount was given for any other purposes. Under these circumstances, claim of the assessee appears to be correct more particularly when the amount has already been accepted by the respective party, therefore, no additions is required to be made u/s 41(1) of the Act. Accordingly, we direct the AO to delete this addition.

17. With respect to the addition of Rs. 34,35,700/- made on account of advance received from Shri Nitin Bansal and Smt. Anita Gupta, it is observed that they have relinquished their booking rights in the office space booked by them in favour of M/s Mentor Infratech Private Ltd. for which the necessary evidences in the shape of affidavit cum indemnity bond, copy of endorsement memo in favour of M/s Mentor Infratech Private Ltd. and declaration of M/s Mentor Infratech Pvt. Ltd. were filed before the AO as available at PB pages 239 to 242. Merely for the reason that the advance is still recorded in the books of account of the assessee company in the name of original allotees / buyers i.e. Shri Nitin Bansal and Smt. Anit Gupta, it cannot be said that it is a cessation of liability or bogus liability recorded in the books and only a transfer entry in the name of M/s Mentor Infratech Pvt. Ltd. remained to be pass for which no addition could be made. Accordingly, we direct the AO to delete the addition of Rs. 34,35,700/-. The Grounds of appeal No. 4 to 5.2 are thus, allowed.

18. Grounds of appeal No. 6 to 6.1 are with respect to the addition of Rs.1,06,90,000/- made by the AO and sustained u/s 68 of the Act.

19. Heard both the parties and perused the materials available on record. The AO made the addition for the reason that the notice issued u/s 131 of the said party remained un-complied. The Ld. CIT(A) also confirmed the action of the AO by holding that the genuineness of the transactions and creditworthiness of the lender was not proved. It was the claim of the assessee that the amount was not received during the year under appeal and it was the opening balance brought forward from the preceding assessment years which fact was duly informed to the Assessing Officer in terms of letter dated 18.12.2019 along with the copy of ledger account of Mr. Ajit Kumar as appearing in the books of the assessee, placed at pages 243 and 244 of PB. The provisions of section 68 of the Act could be invoked where a sum is found credited during the previous year in the books of account of the assessee. In the instant case, since no sum was credited in the books of account of the assessee during the year under appeal and the amount under dispute was actually brought forward from the preceding year and shown as the opening balance, no addition could be made u/s 68 of the Act. The Hon’ble Delhi High Court in the case of CIT Vs Usha Stud Agricultural Firms Ltd. reported in (2008) 301 ITR 384 (Del.) has held that provisions of Section 68 of the Act provides that the addition under that section can be made only of that sum which has been credited during the year in the books of account of the assessee. In other words no addition could be made in respect of opening balances u/s 68 of the Act. Considering these facts, we are of the view that no addition could be made in the hands of the assessee for the opening balance appearing in the name of the creditor Sh. Ajit Kumar. Accordingly, we delete the addition so made. The grounds of appeal No. 6 to 6.2 of the assessee are allowed.

20. Grounds of appeal No. 7, 8 and 9 are with respect to the disallowance of expenses claimed on account of balance written off of Rs.10,55,980/-, repairs & maintenance and various expenses alleged as in the nature of personal expenses.

21. Heard both the parties and perused the materials available on record. Regarding written off of balance of Rs. 1,05,588/- outstanding in the name of Yello Chillies, it is observed that AO disallowed the same for want of evidence. It was the claim of the assessee that this amount was appearing in the list of debtors against the rental charges due from the party and since amounts become irrecoverable, therefore, the same was write off in the books of account and claimed as bad debts. The Hon’ble Supreme Court in the case of TRF Ltd. vs. CIT reported in 323 ITR 397 (SC) holds that after the amendment to Section 36(1)(vii) of the IT Act, w.e.f. 01.04.1989, in order to obtain deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable; and that it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. It is not in dispute that the bad debt is written off in the Profit and Loss Account of the assessee. On perusal of the submissions made on behalf of the assessee, it is noticed that the debts claimed as bad debts are in the nature of bad debts, and therefore, eligible for deduction under Section 36(1)(vii) r.w. Section 36(2) of the Act without any further impediments in the light of the decision of the Hon’ble Supreme Court in the case of TRF Ltd. (supra). Therefore, we direct the AO to delete the disallowance so made of Rs.1,05,588/-.

22. Regarding the disallowance of Rs. 7,00,609/- made out of repair and maintenance expenses, it is observed that the assessee has filed all the relevant evidence before the AO and after filing the details, the AO never asked the assessee for file any further details and made the disallowance. When the AO has not pointed out any defect in the details so filed therefore, no disallowance could be made and, accordingly, the same is hereby deleted.

23. Regarding disallowance of Rs.1,25,108 out of various expenses by holding the same as personal in nature, it is observed that the relevant details were filed before the AO vide letter dated 18.12.2019 placed at PB page 243 along with respective copies of the ledger accounts of the expenses claimed. The AO has ignored the same by holding the same as personal expenses whereas for these expenses are on account of Pooja expenses which is a customary business expenditure, interest paid on service tax which is a normal business expenses and interest on TDS. Except interest on TDS, other expenses are in the nature of routine business expenditures, therefore, disallowance to the extent of interest on TDS is hereby confirmed and remaining disallowances made are deleted. The grounds of appeal No. 7 to 9 are partly allowed.

24. The appeal of the assessee is partly allowed.

25 . Now coming to Appeal of the assesse in ITA No.7640/Del/2025 for Asst. Year 2018-19.

ITA No. 7640/Del/2025 (AY 2018-19)

26. Brief facts of the case are that an assessment order was passed u/s 147 r.w.s 144B of the Act wherein an addition of Rs. 50 lac was made u/s 68 by holding that the rent received from M/s Ganesham Trexim (P) Ltd. as accommodation entry and invoked the provisions of section 115BBE of the Act.

27. Against the said order, the assessee has filed the writ petition No.93/2023 challenging the legality of the assessment order on the ground of non-issuance of notice u/s 143(2) and not providing opportunities of being heard. The said petition stood admitted by the Hon’ble Allahabad High Court and pending for adjudication. In the meantime, the AO has proceeded with the pending penalty proceedings u/s 271AAC and in terms of the order passed on 29.09.2023 levied the penalty of Rs. 4.00 lacs being 10% of the amount of tax payable

28. Against the said order, the assessee preferred an appeal before the Ld. CIT(A) who vide impugned order dated 24.09.2025 has confirmed the said penalty, thus, the assessee is in Tribunal by taking the various grounds of appeal.

29. During the course of appellate proceedings, the assessee has filed concise grounds of appeal which are read as under:

“BECAUSE the Ld. CIT(A) gravely erred in law and on facts in mechanically affirming the penalty under section 271AAC(1) without recording any independent finding as to why the detailed evidences furnished by the Assessee (bank statements, mutual-fund redemption proofs, sale of flat documents, audited financials, ledger confirmations, Form 26AS etc.) were not sufficient proof of the credits despite the same being part of the assessment and penalty records.

2. BECAUSE the penalty under section 271AAC(1) of the Act, being purely consequential to the addition under section 68, is unsustainable as the very addition is bad on facts inasmuch as the AO made no inquiry into the assessee’s documentary evidences, relied merely on generalized “shell company” reports, and failed to establish the alleged accommodation entry beyond suspicion.

3. BECAUSE the ‘AO’ wrongly held that penalty cannot be kept in abeyance and misapplied section 275(1). The CIT(A) failed to adjudicate this ground, rendering the order incomplete and non-speaking.

4. BECAUSE the CIT(A) order is self-contradictory, conclusory, and perverse, containing findings directly inconsistent with the materials on record, and hence liable to be quashed.

30. All the grounds of appeal taken by the assessee are with respect to the levy of penalty u/s 271AAC of the Act, therefore, they are taken together for consideration.

31. Heard both the parties and perused the materials available on record. It is observed that the assessee has filed a writ petition before the Hon’ble Allahabad High Court which is admitted in terms of the order of the Hon’ble Court dated 20.04.2023 wherein the Revenue has sought time for filing the necessary reply. The matter is still pending for adjudication. Since, the matter is sub-judice before the Allahabad High Court wherein the assessee has challenged the very basis of assuming jurisdiction by not issuing the notice u/s 143(2) of the Act, therefore, the matter is highly debatable and has not been concluded as on date and thus, the penalty u/s 271AAC could not be levied until the writ petition has attained finality. Looking to the entirety of the facts and circumstances of the case, we hereby delete the penalty so levied with the directions that if the assessee fails in the aforesaid writ petition, the AO is at liberty to reinitiate the penalty proceedings in accordance with law. With these observations, appeal of the assessee is allowed.

32. In the result, the both appeals filed by the assessee are allowed.

Order pronounced in the open Court on 29.06.2026.